Market Outlook for January 25, 2012
Recap of the Latest Global News
By Cory Vi & Andrew Su on Jan 25, 2012
Investor optimism was dented yesterday after European finance ministers failed to agree on the Greek debt swap deal and called for a greater contribution from debt holders. Finance ministers are pushing bondholders for greater debt relief by asking them to accept lower interest returns in the proposed debt swap deal. The stalling of negotiations has fuelled concerns that Greece will fail to make a bond payment due in late March. The EUR fell from a high of 1.3065 during the Asian session yesterday to as low as 1.2948 in early European trade today.
In more sobering news, the IMF has cut global growth forecasts and warned that the “epicentre of the danger is Europe but the rest of the word is increasingly affected.” It cut global growth for 2012 from a September forecast of 4 percent to 3.3 percent and predicted a recession in Europe. The IMF called for an increase in the eurozone’s rescue fund and a more active role from the ECB to address the crisis. In a dire warning, the IMF warned of a 1930’s style worldwide depression unless more countries play their part and identified a possible global financing need of over $1 trillion in the next few years. Inflation in the UK for December fell to its lowest level in 6 months at an annual rate of 4.2% and the economy contracted in the fourth quarter which saw the GBP fall to as low as 1.5528.
Yesterday, US equities fell after advancing for five consecutive sessions as negotiations stalled in the proposed Greek debt swap deal. Furthermore, the IMF warned that there was potential for “political paralysis” in the United States that could lead to an unwinding of stimulus spending. Asian markets there were opened today closed higher while European shares are down about 1% mid session, falling for the second day, as Ericsson and Novartis missed earnings estimates.
Today the currency markets preferred to shift its focus on the broader economic outlook rather than the Greek saga. On the radar are German IFO Business Climate (Jan), Bank of England Minutes, UK GDP and US FOMC rate decision.
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